September futures for iron ore, the most traded on the Dalian Commodity Exchange, for the period March 25 to April 1, 2024, fell 12.2% from the previous week – to 742 yuan/t ($102.66/t), according to Nasdaq.
On the Singapore Exchange, quotes for May futures on April 1, 2024 decreased by 10.3% compared to the previous week’s price – to US$97/t. Thus, raw material prices continue to fall to new lows.
In March, iron ore prices on the Dalian Stock Exchange fell 15.2% and on the Singapore Stock Exchange 14.4%, from US$121.1/t and US$113.3/t, respectively.
Iron ore prices fell gradually throughout the month, although the market grew slightly in the second half, followed by a sharp drop to US$97-102/t. Thus, prices reached the lowest level since May 2023.
The downward trend in the iron ore market is the result of decreasing demand in China, the world’s largest consumer. Steel mill operations are becoming unprofitable, forcing them to suspend production. Furthermore, last month the country’s authorities imposed environmental restrictions in some regions, which also affected steel production.
Despite the introduction of some economic incentives by China in March, the negative trend still prevailed in the raw materials market.
“Despite impressively strong manufacturing PMI data, iron ore futures fell significantly in response to a significant increase in iron ore supply from Australia – 3 million tonnes during the past week. This may be signaling to the market that mining companies’ maintenance programs in the first quarter have come to an end and that the resumption of supply will increase iron ore stocks in China’s main ports”, comments Atilla Widnell, General Director of Navigate.Commodities.
Imports of raw materials from Brazil are also increasing. Last week, shipments increased by 1.8%. At the same time, the utilization of steel capacity is also gradually increasing, but the growth rate of supply is much higher than demand.
«The drop in prices is related to China and the state of its economy. The Chinese government’s actions will determine how long the current negative trend will last and at what levels prices will stabilize,” said Andriy Glushchenko, analyst at GMK Center.
In the short term, iron ore prices will stabilize as the country enters the construction season. Steel consumption growth in China is expected to remain weak, but higher profits in the industry amid lower raw material prices should boost production.
The Australian government expects iron ore prices to decline over the long term as supply increases and demand decreases. According to the country’s Department of Industry, Science and Resources, iron ore prices are expected to fall to around US$68/t by 2029.
This Wednesday, the September iron ore contract closes down 2.54% in Dalian, at 749 yuan (US$103.54)
